Take-Two Interactive Has Weakened Technically, So Don't Fight the Tape

Traders and investors should consider reducing their long exposure in Take-Two Interactive.

Take-Two Interactive Software, Inc. (TTWO) has done very well as a stock the past three years, however, some sell signals are showing up now so investors and traders may want to adjust their exposure. I looked at TTWO in early August and said, "TTWO looks vulnerable to further declines. Avoid the long side." TTWO was mentioned in last night's Lightning Round on Mad Money so let's check the charts and indicators again.

In this daily bar chart of TTWO, below, we can see that TTWO managed to work a bit higher in price till early October, however, the indicators did not strengthen. As we moved through October we saw TTWO closing below the rising 50-day moving average line and then we failed at the underside of the line and the slope of the line has turned negative. This week we have been testing the slightly rising 200-day line. The daily On-Balance-Volume (OBV) line barely made a new highs in late September and it has shown some weakness this month. The Moving Average Convergence Divergence (MACD) oscillator moved below the zero line this month for an outright sell signal - the first time since February.

In this weekly bar chart of TTWO, below, we can see the significant gains that were made over the past three years. Prices are testing the rising 40-week moving average line this month and it looks like we could break the line. The weekly OBV line is turning down from a lower high than in December even though prices made a higher high. This is a bearish divergence. The MACD oscillator has turned down to a new take profits signal also at a lower high that in November.

In this Point and Figure chart of TTWO, below, we can see a potential downside price target of $88.

Bottom line strategy: traders and investors should consider reducing their long exposure. A close below $110 should be the line in the sand.

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